Traders weigh strong corporate earnings against data showing the US economy shrank in the latest quarter.
US stocks rose as traders watched the strength of corporate earnings versus data showing the US economy contracted unexpectedly in the most recent quarter.
The tech-heavy Nasdaq 100 rose 2%, boosted by gains at Meta Platforms Inc. after its main social network Facebook added more users than forecast. PayPal Holdings Inc. rose on better-than-expected earnings, while Qualcomm Inc. led US chip stocks higher. The S&P 500 rose 1.3% and the Stoxx Europe 600 Index gained 0.7%.
Thursday’s aid rally interrupts a jittery week marked by China’s fight to quell Covid, Russia’s war in Ukraine and concerns that the US Federal Reserve’s monetary tightening could plunge the US economy into recession.
“The earnings season overall has delivered more good news than bad news and could help divert investor focus from the macroeconomic headwinds that hit major indices this month,” said Art Hogan, chief market strategist at National Securities. Of the 140 S&P 500 companies that have reported so far, 77% have beaten earnings estimates and 65% of reporters have upgraded full-year guidance, which Hogan says is boosting overall earnings expectations for S&P 500 members.
Amazon.com Inc. and Apple Inc. earnings, due Thursday, will be closely watched given their outsized impact on US stock indexes. Twitter Inc. missed analyst estimates for revenue in one of its latest earnings reports ahead of Elon Musk’s privatization, reflecting a slowdown in advertising.
A fall in gross domestic product data, the first since 2020, could be a worrying sign for traders as a widening trade deficit and weaker inventory growth undermine an otherwise solid picture of consumer and business demand.
It’s “not a strong starting point for the real economy, which will face a far tighter monetary policy backdrop if the Fed continues to hike rates,” BMO’s Ian Lyngen wrote of the first-quarter GDP data. “The Fed only did a single 25bp hike.”
Treasuries reversed gains and the benchmark 10-year yield rose to around 2.84%.
Oil prices were little changed, with West Texas Intermediate futures undoing previous advances to trade above $101 a barrel.
And in FX markets, the yen’s plunge to a 20-year low could signal a rewrite of the global currency playbook. The offshore yuan fell, the euro fell along with the pound and the ICE dollar index hit a two-decade high.
The Nasdaq’s average daily movement over the past 100 trading days was nearly 1.6%, the highest since the pandemic began, according to Bespoke Investment Group. There have only been four other periods that averaged such daily volatility — besides the pandemic, these include the dot-com bust, the 2008 crisis, and the 2011 crisis very often,” custom strategists wrote in a note.
In Europe, natural gas prices fell after two days of gains as buyers considered options to continue receiving supplies from Russia without violating sanctions. European Union members are urging the bloc to provide clearer guidance on Russia’s demand for payments in rubles, and Germany has signaled it is open to a phased ban on Russian oil imports.
Events to watch this week:
- Tech earnings include Amazon, Apple
- EIA Oil Inventory Report, Wednesday
- US 1Q GDP, Weekly Unemployment Claims, Thursday
- The ECB will publish its economic bulletin on Thursday
Some of the key movements in the markets:
- The S&P 500 was up 0.9% as of 9:35 a.m. New York time
- The Nasdaq 100 rose 1.5%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.5%
- MSCI World Index up 0.8%
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 0.6% to $1.0498
- The British pound fell 0.9% to $1.2435
- The Japanese yen fell 1.8% to 130.70 per dollar
- The 10-year government bond yield rose one basis point to 2.84%
- The 10-year German government bond yield rose 9 basis points to 0.89%
- The 10-year UK government bond yield rose five basis points to 1.86%
- West Texas Intermediate Crude fell 0.3% to $101.71 a barrel
- Gold futures fell 0.1% to $1,886.80 an ounce
–With support from Isabelle Lee, Cecile Gutscher, Charlotte Yang, Macarena Munoz, Andreea Papuc and Kat Van Hoof.